ICG plc (ICG) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to ICG's results for the 12 months ending 31st of March 2023. I am joined by our CEO and CIO, Benoit Durteste; and our CFO, Vijay Bharadia; along with our CFO Designate, David Bicarregui. The slides for today's presentation, along with the accompanying results announcement, are available on our website. [Operator Instructions] And as a reminder, all information discussed today is based on alternative performance measures, which exclude the consolidation of some of our fund structures required under IFRS. At this point, I'll pass over to Benoit.

Thanks, Chris. Good morning, everyone. Thank you for joining us today. You may remember this time last year, I said that we were entering full year '23 in a position of strength, and we were confident on the outlook. I'm pleased to report today that this confidence was justified in that we are delivering financially and strategically. Ours is a long-term business model. And over the last 5 years, we have grown AUM, fee income and fund management company profits at very significant annualized rates. The results we are reporting for full year '23 continue that trajectory. Fundraising remains on track to achieve our accelerated target. We have had our second highest levels on record of deployment and realizations. Our management fees, the main driver of shareholder value, have increased by 23% year-on-year. And we are reporting record levels of fee-earning AUM and FMC profitability. Importantly, we are increasingly well positioned to deliver further future growth. We already have significant embedded growth in our existing strategies. And I believe it's possible that as markets reopen, we could see a rapid increase in activity levels amongst the larger, more established managers such as ICG. Turning to our performance over the last 12 months. We will cover each of these areas in more detail later. But the key takeaway is that we have grown at impressive rates. Our levels of investment activity remains strong by historical standards, and we have made further progress in executing our strategy around sustainability and people. Indeed, on this last point, we were pleased to receive a number of external plaudits during the year, including a first place globally in DE&I from Honordex and, for the first time, becoming included in the Dow Jones Sustainability Index for Europe. This was reflected in our financial performance. I have mentioned management fees up 23%. This has led to third-party fee income surpassing GBP 0.5 billion. We have enjoyed high growth, high margin and a balance sheet that has demonstrated robust performance. The scale and breadth of ICG today is evidenced by the amount we had going on during the year. The 3 final closes we held were all for flagship funds and all at or above their original hard caps. Those 3 funds alone account for over $13 billion of third-party AUM and all charge fees on committed capital, resulting in a material step-up in profitability. The benefits of our historical investments are increasingly visible with 3 second vintages in the market. As these strategies grow up and start generating compounding fee streams with second vintages and beyond, that bodes well for future profit growth. And we continue to invest for the future, in new strategies and new teams as well as in our client and operating platform. From a fundraising perspective, we're pleased to report that we raised $10.2 billion during the financial year and are well on track to achieve our accelerated fundraising target. This is a very strong achievement. Indeed, even stronger than it may appear at first glance. Full year '23, you may remember, was always going to be a lower year in our fundraising cycle after the peak of last year. And this happens to coincide with what is probably the most challenging fundraising environment since the GFC. So to have achieved over $10 billion, which we've guided to as our average annual target for this fundraising cycle, is indeed a great achievement. And there are, I think, 2 main reasons for this. First, diversification at scale. There were 4 different strategies that each raised over $1 billion this year and despite it being an off-cycle year. And second, we have a marketing and operating platform that is set up to raise for multiple strategies concurrently. And this is very demanding and requires a radically different organization and model to those players that raise strategy sequentially. Supporting this fundraising performance, our client base has continued to grow by some 10%. And today, we boast a very diversified range of nearly 650 clients. So even in this environment, we are continuing to attract new clients and not only to new strategies but to well-established strategies as well. As an example, some 30%, 3-0, of Europe third-party AUM is coming from clients that are entirely new to ICG. And that's for a strategy that is several decades old. As you heard during our client and fundraising strategy seminar back in January, we have historically focused on driving client numbers. In the years ahead, there's also a significant opportunity for us to increase the AUM per client, the share of wallet, if you will, by getting larger commitments and by cross-selling. To that end, we are constantly assessing and enhancing our marketing and client relations platform and, in recent months, have been making selected hire to focus on specific products and specific client types. Insurance is an example, which represents about 20% of our AUM or wealth, where we have already had several successes. For wealth, specifically, it is admittedly early days for our industry and with some challenges, no doubt. But I believe this could become a significant source of capital in the future, and we want to ensure we are well positioned and established while keeping our options open on the routes to market. Turning to our investment activity. Despite a globally slower M&A environment, we are continuing to deploy and realize capital at pace and scale, reporting, as I said earlier, our second highest levels of activity on record, second only to last year's exceptionally high levels of activity. Our main products and recognized areas of expertise happen to be very well suited to the current environment. The CIO of one of the largest pension funds in the world was reported as saying recently that Private Debt is the new private equity, and it is true that it's a great time to be a debt provider. Private Debt, driven by senior direct lending, is enjoying strong deployment largely because other sources of debt financing are basically shut. And with high interest rates, high margins and fees, low default rates, reasonable leverage and overall favorable legal documentations, what's not to like? Within our Structured and Private Equity strategies, our flexibility to invest across the capital structure is enabling us to pivot to structure debt solutions and site step the difficulties of equity valuations. And that is proving to be a major competitive advantage. And it really resonates with LPs as they look to diversify away from plain vanilla private equity but still require high returns. From a realization perspective, we have continued to find opportunities to crystallize gains and further anchor portfolio returns. This is important as it enhances our already strong DPI numbers and is highly valued by LPs temporarily starved of capital inflows. Our realized portfolio weighted average return for the year was just under 19%. And although -- I mean, this number is the result of a mix between strategies. Such a high average level clearly points to very strong exits during the year. Our realization numbers do not only represent high volume but high performance as well. The net effect of this fundraising deployment and realization activity is that our total AUM is now $80 billion, and our fee-earning AUM stands at $62.8 billion, up 10% during the year on a constant currency basis and 20% on an annualized basis over the last 5 years. Growth in fee-earning AUM came in part from fundraising, $4.2 billion from strategies that charge fees on committed capital. But the largest contributor was from deployment in strategies that charge fees on invested capital, in particular, the strong deployment we saw in direct lending. And I would like to highlight here that debt strategies with fees on invested are countercyclical in nature. They generate greater profit in a downturn. And that's because in times of credit scarcity, there is hardly any repayment activity for debt strategies and any new investment translates into higher fees and directly profits. This mix of strategies we've built, some with fees on committed, some with fees on invested, is one of the reasons why our business model does well even at a low point in the economic cycle. Turning to the performance of our portfolio companies, which are continuing to do well, very well, actually, seeing double-digit growth in LTM EBITDA in many strategies and with modest levels of leverage. The relatively low levels of leverage also result in high interest coverage. Across our European Corporate portfolios, for example, the median interest coverage is 4x. This combination of our realization profile and the strong operating performance of our portfolio companies brings us to the performance of our key strategies and funds. Unsurprisingly, given what I've just described on portfolio company performance and also given our focus on downside protection and the significant contractual component of return in most of our deals, our funds are showing strong performance with the majority enjoying continued NAV growth. That said, and as I've underlined in the past, short-term movements of fund valuation is not a particular focus for our clients. So we show here 2 more meaningful metrics for them. First is realized performance of a fund at exit, which is why DPI is so important. And to give you an idea, Europe VII has already returned almost half the capital with just 3 deals having fully exited. And we have 12 years to realize this fund. So not only is this fund off to a very strong start, but we have a lot of time to ride out any cycle. And if we look at the predecessor fund, Europe VI, it has a 171% DPI. So it's already a very successful realized vintage with a further EUR 1 billion of unrealized value. So that's what LPs are looking at. Second, another way to look at our investment performance is a life-to-date IRR for the strategy as a whole, and which we show here as a weighted average gross IRR of vintages and the strategy weighted by cost. And that comes out as 18% for European Corporate and 10% on an unlevered basis for direct lending. These are very attractive long-term results for clients who have invested consistently vintage after vintage in these strategies. ICG has a reputation of very strong investment culture and performance, and these numbers should serve to reinforce this. The headline on today's announcement is that we are delivering through cycles, and our results today clearly support that. Strategically, as you know, we have been focused on growing up and growing out. The resulting diversification and increased scale are clear in our performance for full year '23, I think. It's a case of right time, right strategies for us. The current market environment favors strategies in which we have a leading position, any debt strategy, senior or subordinated as well as more opportunistic structured solution. Looking forward, there's still significant runway for us. As our more recent strategies scale and launch subsequent vintages, they are becoming increasingly meaningful to our group results. And as I will elaborate on at the end of this presentation, I'm convinced that managers like ICG that have the scale, breadth of products and, importantly, track record are likely to experience a period of markedly accelerated growth as the market recovers. And on this note, I'll pass it on to Vijay to discuss our financial performance in greater detail. Vijay?

Thank you. Thank you, Benoit, and thank you all for your time today. First, a brief snapshot of our key financial results. We've generated record levels of fee-earning AUM, fee income and fund management company profits. These results underlying the strength of our business, the resilient nature of our fee-centric fund management business with long-term visibility that drives impressive growth through uncertain times and supported by a strong and resilient balance sheet. These results are also enabling us to deliver our 13th consecutive year of our annual growth in our ordinary dividend per share. We are maintaining our progressive dividend policy, and over the last 5 years, have delivered an annualized growth of 21% in dividend per share. I will now go through each of our key financial results in detail. I mentioned the long-term visibility of our business, and to expand on that point, as you can see on here, our management fees are generally charged on committed or invested cost and, as such, are largely immune to market volatility and fund NAVs. To illustrate this, at the year-end, we had $62.8 billion of fee-earning AUM. And if all of our business activities stopped, meaning we didn't do any fundraising, we didn't deploy any capital or we didn't realize any dollar, that AUM alone would generate GBP 460 million in management fees. Furthermore, because we have $14.7 billion of AUM that charges fees on invested capital, we will start earning a further GBP 116 million of management fees when we deploy that capital. So all things being equal, our fee model today gives us visibility on nearly GBP 600 million in annualized management fees. That dynamic of long-term fee visibility and its resilience is very powerful as it enables us to operate through cycles, make long-term investments in our people and our operating platform and deliver shareholder value. Turning to our fee income. Over 95% of our fee income, as you can see on here, is management fees, which grew 23% year-on-year. And total fee income as a whole grew 12% in the year. As Benoit mentioned, both strong fundraising of strategies that charge fees and committed capital and good net deployment of funds that charge fees on invested capital, particularly our flagship strategy and direct lending strategy, contributed to the growth of our fee income. Taking a longer-term perspective, our fee income has grown at an annualized rate of 25% for the last 5 years and are now generating over GBP 0.5 billion in LTM third-party fee income. Moving on to our operating margin. This grew roughly 170 basis points year-on-year to 57.5%. This growth was in part due to GBP 31 million of catch-up fees, which we do not expect to recur in FY '24, as well as a strong focus on cost control, with total operating expenses being flat year-on-year. Within operating expenses, employee costs were up 8.6%, while administrative expenses were down in absolute terms due to lower professional and consulting costs and lower recruitment costs. During FY '24, we anticipate a modest acceleration in hiring, including into our marketing and client relations capabilities. We also expect to make investments in our operating platform, especially in smart sourcing processes by leveraging low-cost jurisdictions such as India. And finally, seed strategies. During FY '23, we recognized in the investment company about GBP 24 million of expenses relating to seed strategies. Once these strategies have their first close, costs associated with these such strategies are recognized in the fund management company. And we'd expect to see some of that during FY '24 as we launch new strategies. In respect of our operating margin in FY '24 as an outlook, while it may soften from FY '23's very strong outcome, we continue to reiterate that we expect it to be above 50%. Turning now to FMC profits. These grew by 9% during the year or 14% on a constant currency basis, excluding the impact of FX hedge derivatives. The growth in fee income, along with flat expenses, materially increased our fund management company profit before tax, which is partially offset by a GBP 27 million reduction in the fair market value of FX derivative hedges. Towards the end of the year, we decided to stop hedging non-sterling net fee income on the basis that commercially, we do not need to do so. Therefore, going forward, the impact of FX movements on the FMC will be more transparent. And we'll be disclosing the FMC results on a constant currency basis. Taking a longer-term view, the growth of our FMC profits is closely linked to the growth of our fee-earning AUM and, over the last 5 years, have grown our FMC profits at an annualized rate of 27%, which is quite remarkable. Now turning to our balance sheet. This remains robust, well-capitalized and valuable. We have total liquidity of GBP 1.1 billion, including an undrawn revolver of GBP 550 million. At the year-end, our net gearing was 0.5x. During the year, we repaid 2 debt facilities totaling GBP 194 million from our cash resources. Our drawn debt is all at fixed rates with an average weighted cost of 3% and a weighted average maturity of just over 4 years. We were upgraded by S&P to BBB during the year and, as a result, are now rated BBB with a stable outlook by both S&P and Fitch. Our NAV per share was 694p, up 5% from September '22 and broadly flat year-on-year. In short, the balance sheet performed in line with our expectations during a period of macroeconomic uncertainty. The largest component of value in our balance sheet is our investment portfolio, and I will now turn to how that performed during the year. Our balance sheet invests alongside our clients and seeds new strategies. During the year, we invested GBP 660 million, of which GBP 214 million was in respect of seeding new strategies. Realizations totaled GBP 794 million. This activity in total resulted in net realizations to the balance sheet of GBP 128 million. There was also a valuation gain of GBP 100 million, which I will discuss in the next slide, and an FX tailwind of GBP 108 million. As a result, our balance sheet investment portfolio modestly increased by 3% during the year and closed at GBP 2.9 billion at the year-end. Aligning interests with clients is expected in our industry and to our long-term success. And in aggregate, our balance sheet investment portfolio now represents only 4% of total AUM of $80 billion. This scale of proprietary capital is a huge strategic and competitive advantage for us as we -- as it allows us to seed and launch new strategies. And we're seeing the benefits of that economically today with, for example, our infrastructure fund. We launched that strategy in 2018 and seeded the first strategy in 2019 and successfully closed the first fund at EUR 1.5 billion in FY '22. This is the economic outcome of our growing out strategy that we have discussed previously. We also remain focused on allocating capital appropriately. During the year, we reduced in absolute terms the firm's commitments to Europe Fund VIII, Europe Mid Market Fund II and Strategic Equity V and also sold down positions in 2 of our credit funds, which generated approximately GBP 100 million of cash. These steps we are taking today will take a number of years to have a visible impact on the absolute size of the balance sheet, but the longer-term direction of travel is very clear. Our balance sheet is therefore generating attractive stand-alone returns and, more importantly, is efficiently supporting the future growth of our business. Turning next to our net investment returns. This has averaged 11% over the last 5 years and generated a positive return of 4% during the year. Of the $102 million net investment returns, $113 million was from investments that are charging interest. And there was a small loss of GBP 13 million from valuation movements. This interest-bearing component is very important. Given the range of our strategies and our ability to invest across the capital structure, our NIR is not purely based on valuation changes. There is also a meaningful underlying income component derived from the structured and debt-like nature of many of our investments. Structured and Private Equity, which accounts for roughly 60% of the balance sheet portfolio, Private Debt and real assets all generated positive returns, whilst the negative NIR in credit was in part due to the GBP 40 million of amortization of CLO dividends, which is included in the GBP 13 million valuation loss that I referred earlier as well as an increase in the assumed default rates for our CLOs that we implemented in the first half of the financial year. For real assets, you will remember that the focus of this asset class is shifting dramatically away from lower-return Real Estate Debt strategies and towards higher-return strategies such as infrastructure, sale and leaseback and in the coming years, real estate opportunistic equity. As these strategies grow and become bigger, they become a major proportion of real assets. And we would expect the NIR, therefore, to reflect the higher returns those strategies are expecting to generate. So in summary, a very resilient performance of the balance sheet portfolio, which should be no surprise given our approach to structuring investments, our focus on downside protection from a risk management perspective and the income component of our NIR. Our confidence in the business model and our prospects is underlined by the fact that our guidance remains unchanged from what we set out at our FY '22 results. Notably, the fundraising is on track with $33 billion of the accelerated $40 billion target raised in the last 24 months. And through a testing period, our portfolios are performing in line with expectations, supporting our medium-term guidance on NIR. And finally, on a personal note, I'd like to thank you all for your challenge and support over the last 4 years. I've thoroughly enjoyed our discussions and look forward to seeing many of you in the coming couple of weeks before I leave in July. And with that, I'll pass back on to Benoit.

Thank you, Vijay. Looking ahead, I expect the market environment to remain challenging for some time. In that context, we are fortunate in that the investment landscape and client appetite has shifted towards our areas of strength, namely debt products and structured transactions. It's the Private Debt is the new private equity comment. Looking further ahead, I believe the structural drivers supporting the industry remain very much intact and could even lead to accelerated growth coming out of this downturn. The investments we have made in recent years are having a material impact on our business now, and the visibility of those benefits is likely to increase in the coming years. We have ample runway for many years of profitable growth from our current waterfront of products alone. And let me expand on this. The growth we've achieved in recent years has been very strong, and the benefits of our increasing scale and breadth are visible in our results today, but the benefits coming through today are only part of the story. The real work we've been doing is laying the ground for further growth to come from a broader range of strategies as they scale. The compounding nature of fee streams as we raise subsequent vintages alongside a more diversified fee income profile is likely to create substantial value in the years ahead. And all the ingredients are here. We now have the investment teams, the balance sheet, the marketing and operating platform and, importantly, the brand. We are, I believe, on a clear trajectory towards lower capital intensity, a more FRE-centric profit stream and higher margins and cash generation over the long term. I also believe that there will be substantial rewards for the winners emerging from this more challenging period. And that is because there's a very possible scenario in which when the market turns, there is a sudden wave of M&A activity of deal flow, which would trigger a wave of realizations across the industry. In turn, this means significant capital being returned to LPs will find themselves with significant liquidity. And in that scenario, it's highly likely that public markets would be rebounding, and many LPs would experience a reverse denominator effect and end up being severely underallocated to alternatives. So we could very well experience a rush by LPs to redeploy into alternative and, obviously, with a focus on those managers that will have done well through the cycle. To be amongst that relatively small group, private market managers will need to have a broad product offering, a differentiated origination capability, a track record through cycles, of course, and a sophisticated client strategy and operating platform. And ICG possesses all of those qualities. Today, we are larger, broader, more financially resilient and the FMC more profitable than at any point in our history. We benefit from significant and better growth from our existing product suites and could enjoy an accelerated growth phase on the other side of the current economic period. This concludes our results presentation for today. I did want to point out, as Vijay said, this is Vijay's last full year presentation. And so I would like to take this opportunity to thank Vijay personally and on behalf of the Board and the whole of ICG for his commitment and dedication over the past 4 years. It's been a period of incredible growth. Fund Management Company profit has more than doubled. The net gearing has practically halved. We've launched many funds, including a number of first-time funds. We've issued 2 bonds, both with impeccable timing, I might add. And all of this would not have been possible without the tremendous effort and progress made specifically in finance and operations. So Vijay, thank you very much. I'm also delighted that we have appointed David Bicarregui to succeed Vijay as CFO. Many of you will meet David in the coming weeks and months. But before we open up to Q&A, I'd like to invite David to maybe say a few words?

Okay. Thanks very much, Benoit. And let me add my thanks to Vijay as well. We're in the middle of a transition period, and it's going incredibly smoothly, thanks to Vijay's dedication. It's great to see many familiar faces in the room today. I look forward to meeting more of you in due course. Been here 8 weeks. It's been invigorating, exciting, a little bit intense, which is what you'd expect. But I've been really impressed by the energy, the enthusiasm and the entrepreneurial spirit of everybody at ICG. My summary is we're large enough to be relevant to our clients on multiple levels across multiple strategies, but we're also nimble enough to take advantage of market opportunities. Extremely well placed, as you heard earlier, to benefit from long-term structural growth in our industry. We've experienced a lot of that growth, obviously, in the last few years, but there's a lot more to come. So my focus is going to be on helping the company and clients reach their full potential. We're going to grow and scale the platforms that we have and really looking forward to doing that here at ICG. As you heard earlier, we've got a clear strategy, and we're going to execute on it. So over the next few weeks, I look forward to meeting more of you. And with that, maybe, Chris, we can turn to some questions.

Perfect. Thank you all very much for your time today. [Operator Instructions] But we will start with any questions in the room. David?

David McCann from Numis. I just wanted to touch on something you were talking about at the end there, Benoit. But obviously, it wouldn't escape your attention that a number of your peers in the industry have been consolidating or have been talking about consolidating recently, two main reasons being for diversification and for scale. I would argue you've got the diversification box ticked, but scale, a bit more question for you. You did obviously make some references at the end. I guess that scale is becoming important as the asset owners, people who buy these kind of funds are looking to do a smaller list, and you've alluded to it and then your comments. So I guess that your current $80 billion scale. Is that enough to really compete at that level? And if not, do you need to do something organically -- sorry, inorganically to enhance what you're doing organically?

Yes. Well, is it enough? I mean you always want to get bigger, and we will get bigger. But we've turned that corner. I think I mentioned that a couple of years ago. I mean we really felt it in our discussions with clients when we started getting to a scale where we were really becoming meaningful. And in order to do that, really, you have to be able to absorb at least $1 billion from these investors per cycle, whether it's on a single strategy or across several strategies, that's the -- to me, that's the minimum level where you start to really be -- you're on their radar. And we've crossed that threshold a couple of years ago. So we're there. Having said that, being bigger is always helpful. But it's a trade-off. These are people businesses. And so making acquisitions can be a good idea, but it can also be quite risky. We've been very successful at growing organically, and it's obviously less risky, also incredibly profitable. So yes, it takes an enormous amount of effort. But if you look at -- just to pick one, look, what we've done in infrastructure. Yes, we could have gone out and tried to buy an infrastructure player probably at a massive valuation. We've built it organically. We're now raising our second fund. We are on track to basically create our own infrastructure fund internally. I quite like that model. I'm not excluding it, by the way. We're not excluding. We're optimistic looking at things, but we have to be mindful that there are cultural issues. We have to be mindful about valuations as well, particularly at this point in the cycle. So yes, you're right, this industry -- which is not a surprise, by the way. That's why we've been growing all this time and expanding the platform. Any industry that matures at some point goes through a consolidation phase. I think we have the size. We're one of the biggest players in Europe. We're going to keep on growing. We'll keep our options open. But this is not -- we're in a position today to answer your question a bit differently. Do we have to do something? No. If we find something that makes sense for us and may help accelerate in one area or another, maybe we'll look at it.

Nick, I think you had a question?

Yes, I actually have loads of questions, but I'll start with -- I'll stick with 3 for now. First of all, Vijay, best wishes on your next move as well. And thank you for the help in the recent years. So in terms of my questions, the first one is on fundraising. Can we just dig into the outlook and pace of fundraising for this year? I think you referenced some first closures, some first-time funds. So interesting to dig into that. And presumably, you do have confidence there. And I guess also from a flagship strategy perspective, I guess, Strategic Equity V looks pretty critical now given that Fund IV is now 95% deployed. So yes, that's the first one, please.

Yes. So on the broader fundraising topic, we have 2 funds that perhaps you could qualify as flagship that are in market. SDP, which was in market last year and continues to be in the market. And I think as we've pointed out during this presentation, direct lending is clearly an area of interest from investors. And so we're reasonably confident that there is going to be continued appetite for this strategy. The Strategic Equity, it's a different situation. That's very much of a niche strategy where ICG is the global leader, which has advantages and complexities. That part of the market is -- it's the only part of the market that I know where there's such an imbalance between supply and demand. There is a huge need of capital. There's huge demand for deals, particularly in the current environment. Just as a reminder for every one of you, if you're not aware, Strategic Equity does GP-led continuation transaction. So that's essentially when private equity sponsors decide they like an asset particularly and want to continue owning it through a subsequent vintage. And we come in to help them through that transaction and fund a significant part of the transaction as well. You can imagine in the current market environment where there is huge uncertainty around valuations, people who do not want to give up on assets that they quite like, there's huge appetite for these types of transactions. Not much capacity because not that many managers have raised money. As I said, we are the largest globally. Now because of this, the amount of deal flow is immense. It's not -- origination is not an issue. The question is choosing your fights and where are you going to best invest the capital. But as a result, we finished raising Fund IV last year. We're already done. It's all invested. And so we're looking for more capital to keep on investing. So this is really a strategy where we're optimizing. We never thought we'd be back in the market so quickly. It's good news because the strategy has done incredibly well, the IRR numbers, you would hardly believe. But at the same time, coming back so quickly on the back of the previous fund creates some difficulties because LPs have just given us money. So that's what we're dealing with. Having said that, there is appetite for that strategy because in the current market, where do you invest, particularly if you're looking for higher returns, if you're looking for low double digit, direct lending, debt strategies do that very well today. If you're looking for higher returns, that is much more difficult to know where you're going. Niche strategies can offer that. So there is appetite for that as well. But it will take time. And by the way, in the current market environment, as I've said, the overall fundraising environment is more challenging. LPs have limited capacity. And so as a result, fundraising takes longer typically. So we're quite confident. The timing is -- there's more question. But in the end, I know we'll raise well. Over what period of time? It's impossible to know.

Understood. That's helpful. And then just second one was on fund valuations. So relative to when you last reported back in November last year, it's interesting to see that LTM portfolio company EBITDA growth has actually improved in Strategic Equity and in SDP. So just curious where that improvement is coming from, what you're seeing. And as part of that as well, I mean can we just disaggregate between EBITDA growth and, let's say, multiples on the valuations? Because just quite a strong improvement in the valuations that you put through this period. I guess is that public markets or private markets? And if it's the latter, what are you seeing that can kind of reassure investors that these are...

Yes. Maybe I'll take what we're seeing at portfolio level and you can take valuation?

Yes.

So yes, I mean at a portfolio level, the performance of portfolio company has been remarkably strong. And that's not, by the way, just an ICG phenomenon. When we look throughout the market, by and large, there are always exceptions and people who do not perform as well. But by and large, the performance of companies in the buyout space, which is skewed towards services, towards the -- you don't have that much in cyclical. But nevertheless, that performance has held up very, very well, and this is reflected in the numbers we're seeing. And for now, looking at the more recent numbers we've seen, looking at the budgets for this year, I'm not seeing that changing for now. Now that's not to say if we have a recession that finally comes in at the back end of this year, early next year, you may see some of that coming in. But what's important to understand, particularly for us, where we have very significant debt exposure, is that compared to previous crisis, in a sense, we've seen this one coming. I've pointed to our numbers of leverage and interest cover. And the thing is with every month that passes where companies deliver higher EBITDA, more cash, you end up in a position, yes, they're in a much stronger position. So even if you do end up with a recession later this year or sometime next year, companies certainly in our portfolio are in a much, much better position to just -- to weather that period. Maybe on valuations?

Yes. Thank you. So for valuations, we take sort of 2-pronged approaches. One is looking at portfolios and comparing that to transactions in the market. And we don't typically anchor to public market comps. We tend to look at private transactions in the industry. And separately, we also do DCF valuations as well. And the question was focused on the DCF valuation in terms of multiples. What we are now doing in terms of DCF valuations, we are actually seeing, to Benoit's point, increased growth in performance of the portfolio companies. However, we are actually reducing the levels of multiples that we're actually applying to that portfolio by a couple of turns actually. So if you want to look at year-on-year, you'll be able to see a reduction in the level of multiples. A couple of other points on that. The -- for DCF valuations, we are actually having lower exit multiples compared to our entry multiples in many cases. And finally, we do have quite a lot of assets where there are other third-party private equity investors in the same asset. We have visibility as to where they are actually valuing their asset compared to us. And in all cases, all cases where we have that, our valuations are actually lower than their valuations. And just since the year-end, we've actually had a close of one transaction as an example, which was actually above our valuation at year-end. So I guess it just gives another sort of perspective in terms of how conservative the valuations are for our portfolio.

Very helpful. And then just the last one, so I'm conscious of time. On costs, I guess there's going to be in a lot of moving parts in FY '24. I guess you might expect some rebounded admin costs because of higher recruiting, maybe higher placement fees. I don't know if -- I don't know if maybe incentive fees per head might come back a little bit. I guess what I'm trying to get at here is consensus has cost growth of 12% this year. I mean does that make sense to you? And can we just dig into the moving parts a little bit? I guess also you've got the cost -- some of the costs from the investment company coming into the FMC by the sounds of it, if there's any first-time closes. So just kind of disaggregating the moving parts of this.

Sure. Yes. So the way to think about cost is -- first of all, during FY '23, and I mentioned this at the half year, actually, interim results, that we had slowed down in our hiring in the second half. And we did apply that strategy during the second half for this financial year. The new financial year FY '24, we accept -- we expect to accelerate hiring, as I mentioned, and particularly in our marketing and our client relations capability. In marketing, Benoit touched on different client types or different product capabilities from a marketing perspective in addition to different markets, by the way. So we are thinking about hiring, for example, in places like the Nordics. We've just hired somebody, I think somebody in the U.S. from a marketing perspective. Benoit touched on the insurance and the wealth channel. So that's where we're adding some talent. And we're not talking lots of people here, by the way, maybe 1 or 2 people here or there. But I think the point is that actually we're now beginning to sort of put the right foundations in place in our marketing capability as we continue to grow the business and if there is an upswing in the markets as well. At the same time, we are also investing in our client relations capability, where we are adding more senior-level product specialism in the client relations team to be able to deal with the growth in the clients that we've experienced. Benoit touched on it, just over 600 clients, 650 clients nearly. And that obviously is quite becoming quite demanding. So we're basically making that a little bit more structured in terms of how we support the client base. And we'll add some capability in our operating platform as well. So those will be the drivers for the cost base. In respect of the new strategies, we may have maybe 1, maybe 2 at most new strategies to launch. We'll see how the market evolves, of course. We are mindful in terms of where the markets are. It's incredibly hard to raise first-time strategies. But if there is an opening, we might raise one strategy. And as you highlighted, yes, the cost of that would come in only once we've had the first close. So not whilst we are raising, but only once we've had the first close. So yes, in terms of the first part of your question, is the consensus reasonably there, we think so in terms of FY '24 versus FY '23.